Brexit could force Silicon Valley to rethink plans for Europe

Nigel Farage, leader of the United Kingdom’s Independence Party, speaks to supporters at College Green in Westminster, central London, a day after Britain voted to break out of the EU.

Nigel Farage, leader of the United Kingdom’s Independence Party, speaks to supporters at College Green in Westminster, central London, a day after Britain voted to break out of the EU.

Photo: ADAM FERGUSON, NYT

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Specialist Michael Pistillo wears Union Jack socks as he works on the floor of the N.Y. Stock Exchange after the British vote.
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Specialist Michael Pistillo wears Union Jack socks as he works on the floor of the N.Y. Stock Exchange after the British vote.
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Photo: Richard Drew, Associated Press

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President Barack Obama pauses as he begins to speak at the Global Entrepreneur Summit at Stanford University, Friday, June 24, 2016, in Stanford, Calif. Obama gave opening remarks on Britain voting to leave the 28-nation European Union. (AP Photo/Pablo Martinez Monsivais) less

President Barack Obama pauses as he begins to speak at the Global Entrepreneur Summit at Stanford University, Friday, June 24, 2016, in Stanford, Calif. Obama gave opening remarks on Britain voting to leave the ... more

Photo: Pablo Martinez Monsivais, Associated Press

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Trader Kevin Walsh (second from right) works on the floor of the New York Stock Exchange, where U.S. stocks were plunging.

Trader Kevin Walsh (second from right) works on the floor of the New York Stock Exchange, where U.S. stocks were plunging.

Photo: Richard Drew, Associated Press

Brexit could force Silicon Valley to rethink plans for Europe

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The venture capitalists and entrepreneurs who populate Silicon Valley say they love to take risks. But the Brexit might just be a little too much for them.

Tech firms wanting to do business in Europe see in London not only a hub for talent but also a gateway to the continent. But given the United Kingdom’s decision to withdraw from the European Union, investors might think twice about writing checks for British startups that can no longer freely move employees and equipment throughout the 28-nation bloc without having to obtain visas.

In fact, London tech firms may instead want to move to Berlin or even Silicon Valley, said McLoughlin, who previously co-founded an enterprise software company in London called Huddle.

For London startups, the Brexit will make the already tight market for tech talent even worse, said Michael Balsam, vice president of the Outsell consulting firm. These companies will face a tough time recruiting employees who can’t freely travel throughout Europe, he said.

“Talent becomes a challenge,” Balsam said.

Photo: ANDREW TESTA, NYT

British Prime Minister David Cameron speaks outside 10 Downing Street a day after Britain voted to break out of the European Union, in London, June 24, 2016. Cameron, who led the campaign to remain in the bloc, announced that he planned to step down by October, saying the country deserved a leader committed to carrying out the will of the people. (Andrew Testa/The New York Times)

British Prime Minister David Cameron speaks outside 10 Downing...

In some ways, Britain leaving the EU is akin to Silicon Valley withdrawing from the United States.

Under the rubric of a “digital single market,” Europe has sought to craft uniform rules that protect intellectual property, safeguard consumer data, eliminate mobile-phone roaming charges and end country-by-country restrictions on such content as movies and TV shows.

The European Commission estimates that eliminating the remaining barriers to online services among the EU nations — a market of 500 million people — could add $470 billion to the European economy. The Brexit, however, will likely endanger the integrity of a digital single market.

In addition, the United States has been negotiating a massive trade and investment treaty with the European Union in the spirit of the Trans-Pacific Partnership deal that the Obama administration recently inked with 11 Asian countries. Britain’s withdrawal from the EU means the United States will have to craft separate deals with Europe and the United Kingdom.

However, companies are unlikely to abandon London in droves, Webber said. The capital is still a world-class city with a strong financial sector and first-rate workforce.

Britain also represents the second largest economy in Europe and the biggest market for e-commerce. In fact, large tech firms like Amazon and Google will find it much easier to directly lobby British officials rather than joust with regulators from more than two dozen European countries, Balsam said.

But the most serious consequence from the Brexit is instability. Under the EU treaty, the United Kingdom has two years to negotiate its departure from the bloc. While the EU wants Britain to move quickly, the Brits will likely take their time, Webber said.

So a lot could still change, which makes it hard for investors and entrepreneurs to plan ahead.

“We’re dealing with a lot of uncertainty,” Webber said. “There’s a lot of speculation. We don’t have a lot of answers.”